Anti-money laundering compliance at law firms can easily become a routine of completed forms. The client is identified, sanctions and PEP screening is done manually or through software, and the file moves on. But a finished checklist does not mean the firm has understood the risk in front of it.

According to SmartSearch, even firms with advanced compliance software, thorough policies and regular training can fall short if fee earners do not apply professional judgement to each client and matter. The Solicitors Regulation Authority (SRA) has again flagged risk assessments as a weakness.

Its 2024/25 AML reporting found that 39% of client and matter risk assessments reviewed were ineffective, and 16% of files had no assessment or an incomplete one.

The regulator’s position is that firms must show more than evidence that checks took place. They must show they understood the risks, weighed them and reached a reasoned decision.

A client risk assessment looks at the individual or company. A matter risk assessment looks at the specific legal work.

A long-standing corporate client may be low risk in general, but a particular deal could bring in unfamiliar jurisdictions, opaque ownership or unexplained funding. SRA guidance expects firms to consider both, understand why services are needed, examine source of funds and record their reasoning. A rating of “medium” or “low” means little without that reasoning.

The decision to keep acting for a client is also a risk-based choice. Regulators warn against assuming existing clients are lower risk and expect assessments to be revisited when new information emerges.

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